British parliamentarians have urged sweeping reforms this month to the UK’s insolvency sector after an inquiry found the profession was operating like the “Wild West.”
MPs said court-appointed insolvency practitioners were willing to “sell their independence and considerable powers” to be appointed to an insolvency case.
That “Wild West” quote is unfortunate but true for some insolvency practitioners.
Insolvency service providers have, in general, improved over the years. All who operate in asset recovery will appreciate the sort of historical problems that I am alluding to. However, for the UK Parliament to become involved speaks volumes.
The MPs said that conflicts of interests are widespread and that practitioners have departed from the core principle that “rescuing a business should be the primary goal of their work,” as defined in the Insolvency Act 1986.
My reading of all this is that some insolvency practitioners are trying to have their cake and eat it too – with one foot over the outer boundary to gain an advantage.
Court-appointed insolvency practitioners should act impartially and be independent of those involved in the clammer for assets. The role brings with it some readily saleable chattels in the form of the powers bestowed on the insolvency practitioner. The MPs’ inquiry goes further, alleging that conflicts of interest are regularly being ignored, which is a worrying development for a lawyer as these rules should be fundamental to the legal process.
The problem is serious when you consider that only five insolvency practitioners have had their licenses revoked from almost 8,000 complaints in the last ten years. Punishments are “generally derisory,” the inquiry stated.
The inquiry’s suggestion that there should be a “code of ethics” is admirable. Some brief research suggests that codes of ethics and guidelines already exist, published by various professional bodies. Of course, practitioners who already adhere to a code of honor will welcome the proposition.
But as the proposed code of ethics will either likely be voluntary or follow a self-regulatory model, some in the practice may well continue to act questionably.
With thanks to Tony McClements, Senior Investigator at Martin Kenney & Co, for his assistance with this post. He served for 33 years with UK police forces and has specialized in Fraud & Financial Investigation since 1998. He is also a lecturer in these subjects at the University of Central Lancashire (UCLAN).